JOHN GARRETT PENN, District Judge
This matter is before the Court on the defendants' motions to dismiss the amended complaint.
The defendants have filed separate but substantively similar motions. It is well established that a complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). All well-pled allegations in the plaintiff's complaint must be accepted as true at this stage. Miree v. DeKalb County, 433 U.S. 25, 27 n. 2, 53 L. Ed. 2d 557, 97 S. Ct. 2490 (1976); Phillips v. Bureau of Prisons, 192 U.S. App. D.C. 357, 591 F.2d 966, 969 (D.C. Cir. 1979). Applying these stringent standards to this case, and for the reasons stated herein, the Court grants the motions in part, denies the motions in part, and orders certain allegations repleaded.
The gravamen of this action is "churning". Plaintiffs allege that the defendants (a brokerage firm and its account executives) "devised and implemented a fraudulent scheme to generate commissions and margin interest from excessive, unnecessary and unsuitable trading activity in the plaintiffs' account." Count I of plaintiffs' Amended Complaint alleges violations of sections 10(b), 20(a), and 20(b) of the Securities Exchange Act, 15 U.S.C. §§ 78j(b), 78t(a), and 78t(b); SEC Rule 10b-5, 17 C.F.R. § 240.10b-5; and SEC Rule 15cl-7, 17 C.F.R. § 240.15cl-7; Rule 405 of the New York Stock Exchange Act (NYSE); and Article III, Section 2 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (NASD). Count II alleges violations of 18 U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), and 1962(c) and (d) (RICO). Counts III and IV allege common law fraud and breach of fiduciary duty. Defendants have moved to dismiss all claims on a variety of grounds.
a. The Federal Securities Law Claims (sections 10(b), 20(a), and 20(b)).
Under federal securities law, "churning is cognizable as fraud." Russo v. Bache Halsey Stuart Shields, Inc., 554 F. Supp. 613, 617 (N.D. Ill. 1982). Churning involves "excessive trading of an investment account, without regard to the interests of the investor, for purposes of generating commissions for the broker and brokerage firm." Hecht v. Harris, Upham and Co., 430 F.2d 1202 (9th Cir. 1970). "It is the aggregation of transactions, excessive in number and effect, which constitutes the gravamen of the cause of action." Fey v. Walston & Co., 493 F.2d 1036, 1050 (7th Cir. 1974). Churning of securities constitutes a claim under 10(b) of the 1934 Act. Horne v. Francis I. du Pont & Co., 428 F. Supp. 1271, 1274 (D. D.C. 1977).
A two year D.C. blue sky laws limitations period is prescribed by D.C. Code § 2-2613 for claims arising under SEC Rule 10b-5 and 10(b) of the Securities Exchange Act of 1934. Forrestal Village, Inc. v. Graham, 179 U.S. App. D.C. 225, 551 F.2d 411 (D.C. Cir. 1977). The last act of churning alleged in the amended complaint occurred in May of 1981. As this action was not filed until December 5, 1983, approximately two and one half years after the alleged violation, the defendants now seek dismissal of these claims on the grounds that they are time barred.
Under the doctrine of equitable tolling:
read into every federal statute of limitations, including the adoption of an analogous local statute of limitations, is the equitable doctrine that in [the] case of defendant's fraud or deliberate concealment of material facts relating to his wrong-doing, time does not begin to run until plaintiff discovers, or by reasonable diligence could have discovered, the basis of the lawsuit.